Funding Status and Progress:

The amount shown as "pension benefit obligation" is a standardized disclosure measure of the present
value of pension benefits, adjusted for the effects of projected salary increases, estimated to be payable in the
future as a result of employee service to date. The measure is the actuarial present value of credited projected
benefits and is intended to help users assess the Systems' funding status on a going - concern basis, assess
progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among
public employee retirement systems. The measure is independent of the actuarial funding method used to
determine contributions to the System as described below.

The fiscal year 1989 pension benefit obligation was determined as a part of an actuarial valuation at June
30,1989. Significant actuarial assumptions used include (a) a rate of return on the investment of present and
future assets of 7.5 percent per year compounded annually, (b) projected salary increases from 5 percent to
6 percent per year compounded annually, attributable to inflation, (c) additional projected salary increases
ranging from .94 percent to 6.82 percent per year, attributable to seniority/merit, and (d) postretirement
benefit increases ranging from 3 percent to 6 percent per year depending on the system.

At June 30,1989, the unfunded pension benefit obligation (i.e., pension obligation less net assets available
for benefits) of the System was as follows (amounts expressed in thousands):

Pension benefit obligation:
Retirees and beneficiaries currently
receiving benefits and terminated
employees not yet receiving benefits .....	$ 6,275,808
Current employees:
Accumulated employee contributions
including allocated investment income . .	1,320,556
Employer - financed vested and nonvested	7,804,027
Total pension benefit obligation .......	15,400,391
Net assets available for benefits, at cost
(market value is $10,577,045) ............	9,090,704
Unfunded pension benefit obligation . . .	$ 6,309,687

There were no changes in actuarial assumptions or benefit provisions which significantly affected the
valuation of the pension benefit obligation during fiscal year 1989.

Contributions Required and Made:

The State's retirement contributions are appropriated annually, based upon actuarial valuations. In this
regard, the System has engaged an independent firm of consulting actuaries to prepare annual actuarial
valuations and perform various actuarial consulting services. Effective July 1, 1980, in accordance with the
law governing the Systems, all benefits of the System are funded in advance. The entry age normal cost
method is the actuarial cost method used to determine the employers' normal and accrued liability
contribution rates and the unfunded actuarial accrued liability. Using this method the actuarial present value
of the projected benefits of each individual included in an actuarial valuation is allocated on a level basis over
the earnings or service of the individual between entry age and assumed exit age(s). The portion of this
actuarial present value allocated to a valuation year is called the normal cost. The portion of this actuarial
present value not provided for at a valuation date by the actuarial present value of future normal costs is
called the actuarial accrued liability.

Employer contributions to the System totalling $599,586,000 (14.0% of covered payroll) for fiscal year 1989
were made in accordance with actuarially determined contribution requirements based on an actuarial
valuation performed as of June 30,1987. This amount consisted of $266,823,000 normal cost and $332,763,000
amortization of the unfunded actuarial accrued liability. Employee contributions to the System for fiscal year
1989 were $110,562,000 (2.6% of covered payroll).

The liquidation period for the unfunded actuarial accrued liabilities (as provided by law) is 31 years from
June 30,1989. Significant actuarial assumptions used to compute contribution requirements are the same as
those used to compute the pension benefit obligation.

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